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August 28, 2010The Speeding Ticket:
December 18, 2009
Read This Slowly
Jack took a long look at his speedometer
before slowing down: 73 in a 55 zone.
Fourth time in as many months.
How could a guy get caught so often?
When his car had slowed to 10 miles an hour,
Jack pulled over, but only partially.
Let the cop worry about the potential traffic hazard.
Maybe some other car will tweak his backside with a mirror.
The cop was stepping out of his car,
the big pad in hand.
Bob? Bob from Church?
Jack sunk farther into his trench coat.
This was worse than the coming ticket.
A cop catching a guy from his own church
A guy who happened to be a little eager
to get home after a long day at the office.
A guy he was about to play golf with tomorrow.
Jumping out of the car,
he approached a man he saw every Sunday,
a man he’d never seen in uniform.
‘Hi, Bob. Fancy meeting you like this..’
’Hello, Jack.’ No smile.
’Guess you caught me red-handed
in a rush to see my wife and kids.’
‘Yeah, I guess.’ Bob seemed uncertain.
Good.
’I've seen some long days at the office lately.
I’m afraid I bent the rules a bit -just this once.’
Jack toed at a pebble on the pavement.
‘Diane said something about roast beef and potatoes tonight.
Know what I mean?’
‘I know what you mean
I also know that you have a reputation in our precinct ‘
Ouch.
This was not going in the right direction.
Time to change tactics..
‘What’d you clock me at?’
Seventy. Would you sit back in your car please?’
’Now wait a minute here, Bob.
I checked as soon as I saw you.
I was barely nudging 65..’
The lie seemed to come easier with every ticket.
Please, Jack, in the car’
Flustered, Jack hunched himself through the still-open door. Slamming it shut, he stared at the dashboard.
He was in no rush to open the window.
The minutes ticked by.
Bob scribbled away on the pad.
Why hadn’t he asked for a driver’s license?
Whatever the reason,
it would be a month of Sundays
before Jack ever sat near this cop again.
A tap on the door jerked his head to the left.
There was Bob, a folded paper in hand
Jack rolled down the window a mere two inches,
just enough room for Bob to pass him the slip.
’Thanks.’
Jack could not quite keep the sneer out of his voice.
Bob returned to his police car without a word.
Jack watched his retreat in the mirror.
Jack unfolded the sheet of paper.
How much was this one going to cost?
Wait a minute..
What was this? Some kind of joke?
Certainly not a ticket. Jack began to read:
‘Dear Jack, Once upon a time I had a daughter.
She was six when killed by a car.
You guessed it – a speeding driver.
A fine and three months in jail, and the man was free.
Free to hug his daughters, all three of them.
I only had one, and I’m going to have to wait until Heaven
before I can ever hug her again.
A thousand times I’ve tried to forgive that man
A thousand times I thought I had.
Maybe I did, but I need to do it again.
Even now.
Pray for me.
And be careful, Jack,
my son is all I have left.’
’Bob’
Jack turned around in time to see Bob’s car
pull away and head down the road.
Jack watched until it disappeared..
A full 15 minutes later, he too,
pulled away and drove slowly home,
praying for forgiveness and
hugging a surprised wife and kids when he arrived
Life is precious.
Handle with care.
Drive safely and carefully.
Remember, cars are not the only things
recalled by their maker.
Funny how you can send a thousand jokes
through e-mail and they spread like wildfire,
but when you start sending messages
regarding the sanctity of life,
people think twice about sharing.
Funny how when you go to forward this message,
you will not send it to many on your address list
because you’re not sure what they believe,
or what they will think of you
for sending it to them.
Pass this on,
you may save a life.
Maybe not,
but we’ll never know if we don’t try.
May today there be peace within you.
May you trust God
that you are exactly where you are meant to be.
‘I believe that friends are quiet angels
who lift us to our feet
when our wings
have trouble remembering how to fly.’
April 28, 2009
Graduation Massey University 2009 Daniel Feller BBS
How do you do this?
I hope this finds you well and in good spirit.
Just wanted to share with you a recent achievement. It took a long time to get there. It was worth it and fun along the way!
Greetings from Auckland New Zealand and make it a great day!
Daniel Feller
November 9, 2008
Essay 58 – How to innovate right now
The biggest secret of innovation is that anyone can do it. The reason is simple: It’s just not that hard. Look up the word “innovate” in any dictionary and see what it actually means, instead of what you think it means. You’ll find something like this: To innovate is “to introduce something new.” That’s it. It doesn’t say you need to be a creative genius, a workaholic, or even have on clean underwear. It’s just three little words: introduce something new. And I promise that by the end of this essay, you’ll have all the secrets needed to do it yourself.
The key word in the definition is “new.” The common trap about newness is the assumption that new means something the universe has never seen before. This turns out to be the third most ridiculous assumption in the history of mankind (you’ll have to figure out the other two for yourself). Here’s proof: Name any great innovator, and I guarantee they borrowed and reused ideas from the past to make whatever it is they are famous for.
The Wright brothers, the inventors of powered flight in the United States, spent hours watching birds. As boring as it seems, we have bird-watching to thank for the supersonic jet planes we have today. Picasso’s development of cubism, one of the great artistic movements of the last two centuries, was heavily influenced by his exposure to African painting styles, as well as the work of an older French painter, Cezanne. And Thomas Edison did not create the concept of powered light: You’d have to talk to the thousands of people who died before Edison was born who turned wood, wax, oil, and other fuels into controllable and portable light sources (not to mention Joseph Swan, who patented the electric light before Edison).
Even in today’s high-technology world you can find easy connections between what we call “new” and ideas from the past. The World Wide Web and the Internet get their names from things thousands of years old. The first webs were made by spiders, and the first nets were used to catch fish by indigenous people around the world, thousands of years before the first computer. Google, the wonderful search tool, is often called a search engine, in reference to concepts of physical mechanics, not digital bits.
All these examples prove that the trick to innovation is to widen your perspective on what qualifies as new. As long as your idea, or your use of an existing idea, is new to the person you are creating it for, or applies an existing concept in a new way, you qualify as an innovator from their point of view, and that’s all that matters.
Even with these improved definitions, it takes more to make innovation happen. The tool kit of every innovator typically includes three things: questions, experiments, and self-reliance.
Ask Questions.
The easiest place to start is with things you do every day. Simply ask: Who else does this, and how do they do it differently? If you only know one way to do something, you’re making a big assumption. You’re betting that of the infinite ways there are to do it, the single one you know is the best. I’m a gambling man myself, but I wouldn’t make that bet, as those odds, one against infinity, are embarrassingly bad. Even simple things like washing dishes or tying shoelaces have dozens or hundreds of alternative approaches in use by different people around the world. Those methods are all potential innovations for you and everyone you know. The problem is that people have to go out of their way to find those alternatives and bring them back.
Not sure how to start? It’s with more questions. Useful questions for innovators include:
- Why is it done this way?
- Who started it and why?
- What alternatives did they consider, and what idea did their new idea replace?
- What are my, or my friend’s, biggest complaints with how we do this thing, and what changes might make it better?
- How is this done in other towns, countries, cultures, or eras of time?
- What different assumptions did they make or constraints did they have?
- How can I apply any of the above to what I do?
Many great innovators asked better questions than everyone else, and that’s part of why they were successful. It wasn’t genius, whatever that means, special top-secret brain exercises they did every morning, or even how much money they had. It was through the dedicated pursuit of answers to simple questions that they found ideas already in the world that might be of use.
Isaac Newton asked how could the force of gravity affect apples as well as the moon? And by framing the question that way, he made observations and developed mathematics related to gravity, something no one else had done to his level of satisfaction. Many of Leonardo da Vinci’s inventions started with him asking the question: How does water flow? It was his many studies of rivers, streams, and the way water moved that led to his inventions for water-powered wheels, ways to move water in aqueducts and canals, and pumps for wells. Without asking questions and looking around, even at obvious everyday things like water and gravity, Newton’s and da Vinci’s creative talents would never have had a chance to surface.
Try Things Yourself.
Asking questions is one thing, but trying to answer them is another. There is no substitute for firsthand experience when creating things. The unique aspects of who you are, including qualities you may not like about yourself, are an asset when it comes to creative thinking. No one can see the world exactly the way that you do.
This means that if you can experience, watch, or make something yourself, you may discover lessons and make observations that other people failed to notice. Those observations are the seeds of innovation: You might see an old idea or tool in a way no one else in your family, business, or city has before, and if you follow it, an innovation might be yours.
Remember that the knowledge we have today about the universe did not come from magic books that have been sitting around waiting for us since the dawn of time. It came from curious people who not only asked questions, but followed them to places others weren’t willing to go.
Francis Crick and James Watson, the discoverers of DNA, followed hunches and made guesses to answer their questions, spending hours in labs doing things their professors thought were not only unscientific, but a giant waste of time. Even Socrates, the greatest philosopher of the Western world, was against the idea of writing things down in books. Had his pupil Plato not picked up on the innovation known as writing, and written down Socrates’s story himself, we wouldn’t know either of their names, much less the Socratic method for learning that many universities base their teachings on today.
Progress depends on people thinking independently and following their curiosity as far as they can, including doing things others around them refuse to try.
Try, Learn, and Try Again.
The last step is not to expect success the first time. If you’re doing something new for yourself or your friends, it’s hard to predict what the outcome will be. And the bigger the innovation, the more risk — and work — there is: Making innovative cookies is one thing, but changing the way people think or work is another.
Since long hours of work might be required to satisfy your curiosity, what’s important is how you respond to failure. Can you find the courage to respond not with embarrassment or regret, but with more questions: Why did this fail? What can I learn now? What will I do differently next time? If you can, like most great inventors and creators throughout history did, you’ll be well on your way.
Timeline: Global credit crunch
October 7, 2008
A year ago, few people had heard of the term credit crunch, but the phrase has now entered dictionaries.
Defined as “a severe shortage of money or credit”, the start of the phenomenon has been pinpointed as 9 August 2007 when bad news from French bank BNP Paribas triggered sharp rise in the cost of credit, and made the financial world realise how serious the situation was.
The problems, however, started much earlier. GROWING SUB-PRIME PROBLEMS
After a two year period between 2004 and 2006 when US interest rates rose from 1% to 5.35%, the US housing market begins to suffer, with prices falling and a rise in homeowners defaulting on their mortgages.
Default rates on sub-prime loans – high risk loans to clients with poor or no credit histories – rise to record levels.
APRIL-AUGUST 2007: SUB-PRIME CONTAGION
April
|
The credit losses associated with sub-prime have come to light and they are fairly significant…Some estimates are in the order of between $50bn and $100bn of losses |
New Century Financial, which specialises in sub-prime mortgages,
As it sold on many of its debts to other banks, the collapse in the sub-prime market begins to have an impact at banks around the world.
July
Investment bank Bear Stearns tells investors they will get little, if any, of the money invested in two of its hedge funds after rival banks refuse to help it bail them out.
Federal Reserve chairman Ben Bernanke follows the news with
AUGUST 2007: SCALE OF THE CREDIT CRISIS EMERGES
9 August 2007
|
BNP’s statement is scary, to put it mildly |
Investment bank BNP Paribas tells investors they will not be able to take money out of two of its funds because it cannot value the assets in them, owing to a “complete evaporation of liquidity” in the market.
It is the clearest sign yet that banks are refusing to do business with each other.
The European Central Bank
. It adds a further 108.7bn euros over the next few days.
The US Federal Reserve, the Bank of Canada and the Bank of Japan also begin to intervene.
17 August
by half of a percentage point to 5.75%, warning the credit crunch could be a risk to economic growth.
21 August
UK sub-prime lenders begin to withdraw mortgages or put up the cost of borrowing for UK homeowners with poor credit histories.
28 August
German regional bank Sachsen Landesbank faces collapse after investing in the sub-prime market;
SEPTEMBER 2007: A RUN ON A BANK
3 September
German corporate lender IKB
4 September
The rate at which banks lend to each other rises to its highest level since December 1998.
The so-called
banks either worry whether other banks will survive, or urgently need the money themselves.
13 September
|
The fact that it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives |
The BBC reveals Northern Rock has asked for and
in the latter’s role as lender of last resort.
Northern Rock relied heavily on the markets, rather than savers’ deposits, to fund its mortgage lending. The onset of the credit crunch has dried up its funding.
A day later depositors withdraw £1bn in what is
They continue to take out their money until the government steps in to guarantee their savings.
18 September
The US Federal Reserve
19 September
After previously refusing to inject any funding into the markets,
OCTOBER 2007: MAJOR LOSSES BEGIN TO EMERGE
1 October
Swiss bank UBS is the world’s first top-flight bank to
The chairman and chief executive of the bank step down. Later, banking giant Citigroup unveils a sub-prime related loss of $3.1bn. A fortnight on Citigroup is forced to write down a further $5.9bn. Within six months, its stated losses amount to $40bn.
30 October
Merrill Lynch’s chief
NOVEMBER 2007: UK HOUSING MARKET ‘TURNS DOWN’
29 November
The Bank of England
30 November
The Council for Mortgage Lenders (CML)
saying that without more funding available on financial markets, mortgage lenders will not be able to offer as many mortgages.
DECEMBER 2007: HELP IS AT HAND
6 December
US President George W Bush
The Bank of England cuts interest rates by a quarter of one percentage point to 5.5%.
13 December
The US Federal Reserve
The Bank of England calls it an attempt to “forestall any prospective sharp tightening of credit conditions”. The move succeeds in temporarily lowering the rate at which banks lend to each other.
17 December
The central banks continue to make more funding available.
and, the following day, $500bn from the European Central Bank to help commercial banks over the Christmas period.
NEXT UP: THE BOND INSURERS
19 December
Ratings agency Standard and Poor’s downgrades its investment rating of a number of so-called monoline insurers, which specialise in insuring bonds. They guarantee to repay the loans if the issuer goes bust.
There is concern that insurers will not be able to pay out, forcing banks to announce another big round of losses.
9 January 2008
The World Bank
as the credit crunch hits the richest nations.
18 January
A rush to withdraw money from its commercial property funds
for investors wanting to take their money out.
It blames the rush of withdrawals on concerns about the US sub-prime mortgage collapse, recession worries and interest rates.
21 January
Global stock markets, including London’s FTSE 100 index,
22 January
The US Fed
- its biggest cut in 25 years – to try and prevent the economy from slumping into recession.
It is the first emergency cut in rates since 2001. Stock markets around the world recover the previous day’s heavy losses.
31 January
A major bond insurer MBIA,
-blaming its exposure to the US sub-prime mortgage crisis.
FEBRUARY – MARCH 2008: BIG NAME CASUALTIES
7 February
US Federal Reserve boss
saying he is closely monitoring developments “given the adverse effects that problems of financial guarantors can have on financial markets and the economy”.
The Bank of England cuts interest rates by a quarter of one percent to 5.25%.
8 February
|
Some investors forgot the golden rule of financing: ‘Don’t buy things that you don’t understand’ |
In the UK, the latest
its highest level since 1999.
10 February
Leaders from the G7 group of industrialised nations say worldwide losses stemming from the collapse of the US sub-prime mortgage market could reach $400bn.
17 February
After considering a number of private sector rescue proposals, including from Richard Branson’s Virgin Group,
7 March
In its biggest intervention yet,
to try to improve liquidity in the markets.
17 March
Wall Street’s fifth-largest bank,
in a deal backed by $30bn of central bank loans.
A year earlier, Bear Stearns had been worth £18bn.
28 March
Nationwide
revising its previous forecast of no change in prices.
APRIL 2008: THE 100% MORTGAGE IS CONSIGNED TO HISTORY
2 April
Moneyfacts, which monitors financial products,
in the previous seven days.
|
I have a deep sense of shock at how deeply our successful industry has already been hit by these unprecedented funding market conditions |
Five days later the 100% mortgage disappears when
8 April
The International Monetary Fund (IMF), which oversees the global economy,
It says the effects are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.
10 April
The Bank of England cuts interest rates by a quarter of one percent to 5%.
11 April
A warning is issued by the CML that the amount of funding available for mortgages in the UK could be cut in half this year.
|
The effects of the credit crunch are likely to be broader, deeper and more protracted than previously expected |
15 April
Confidence in the UK housing market
according to the Royal Institution of Chartered Surveyors, because of the “unique liquidity blight”.
But it does add that the situation is good news for buyers with large deposits who can buy property that was previously out of reach.
21 April
The Bank of England announces details of an
by allowing them to swap potentially risky mortgage debts for secure government bonds.
APRIL – JUNE 2008: BANKS PASS ROUND THE HAT
22 April
Royal Bank of Scotland
with a £12bn rights issue – the biggest in UK corporate history.
The firm also announces a write-down of £5.9bn on the value of its investments between April and June – the largest write-off yet for a British bank.
25 April
Persimmon becomes
citing the lack of affordable mortgages and a fall in consumer confidence.
It adds sales have fallen by a quarter since the beginning of the year.
|
Because of the uncertainties in the global economy and the UK lending environment, it is difficult to predict when the [housing] market will improve |
29 April
The CML says
, the lowest monthly number since records began in 1999.
30 April
The first
is recorded by Nationwide.
Prices were 1% lower in April compared to a year earlier after a “steep decline” in home buying over the previous six months.
Later in the week, figures from the UK’s biggest lender Halifax, show a 0.9% annual fall for April.
2 May
More than
government figures show, a rise of 54% on the previous year. Retail and construction firms are hardest hit.
22 May
Swiss bank UBS, one of the worst affected by the credit crunch,
to cover some of the $37bn it lost on assets linked to US mortgage debt.
19 June
There are significant developments in two major credit crunch-related investigations in the US, which it is hoped will restore confidence in the credit markets.
The FBI
as part of a crackdown on alleged mortgage frauds worth $1bn.
Separately,
linked to sub-prime mortgages.
It is alleged they knew of the funds’ problems but did not disclose them to investors, who lost a total of $1.4bn.
25 June
Barclays
to bolster its balance sheet.
The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in the British bank, giving it a 7.7% share in the business. A number of other foreign investors increase their existing holdings.
JULY 2008: MAJOR LENDERS ON THE EDGE
8 July
The gloomy findings of a survey of its members
within months.
Meanwhile, the FTSE 100 stock index briefly dips into a “bear market”, in which the market suffers a 20% fall from its recent highs.
|
The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected |
13 July
- the second-biggest bank in US history to fail.
14 July
Financial authorities
As owners or guarantors of $5 trillion worth of home loans, they are crucial to the US housing market and authorities agree they could not be allowed to fail.
The previous week, there had been a panic amongst investors that they might collapse, causing their share prices to plummet.
21 July
Just
because they are priced higher than existing shares are trading on the stock market.
But HBOS still gets the £4bn it wanted, as the unsold new shares are bought by the issue’s underwriters.
31 July
UK house prices
a decline of 8.1%.
The average home now costs £169,316. That is nearly £15,000 cheaper than in the same month last year.
Meanwhile, HBOS reveals that profits for the first half of the year sank 72% to £848m, while bad debts rose 36% to £1.31bn as customers failed to repay loans.
AUGUST – SEPTEMBER 2008: GIANTS SUFFER
4 August
Global banking giant HSBC
after suffering a 28% fall in half-year profits.
Of Europe’s top banks, HSBC has among the heaviest exposure to the troubled US housing and credit markets.
22 August
The bad news continues with revised figures from the ONS revealing that the UK economy is a standstill.
28 August
Nationwide reveals that UK house prices have fallen by 10.5% in a year.
A day later
blaming surging mortgage arrears for a rise in impairment.
Looking ahead, it warned it expected arrears to remain at high levels for the rest of the year.
30 August
Chancellor Alistair Darling
in an interview with the Guardian newspaper, saying the current downturn would be more “profound and long-lasting” than most had feared.
1 September
Official figures from the Bank of England show a slump in approved mortgages for July.
Meanwhile, while
and two-year lows of $1.80.
2 September
In an effort to kick-start the UK housing market
from £125,000 to £175,000.
But there is more bad news, as the Organisation for Economic Cooperation and Development forecasts that the UK will be in a full blown recession by the end of the next two quarters. A day later the European central bank cuts growth forecast 2009 to 1.2% from 1.5%.
4 September
The Bank of England leaves rates on hold at 5% while the latest figures from the Halifax show that house prices in England and Wales continue to fall.
5 September
A raft of negative news from around the world
The US labour market figures – which showed the unemployment rate rising to 6.1% – were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.
6 September
The Halifax
Chief executive Andy Hornby explains that British banks will continue to suffer major problems in offering loans until they can raise significant sums on wholesale markets, something that will not be possible until US house prices recover.
7 September
Mortgage lenders Fannie Mae and Freddie Mac – which account for nearly half of the outstanding mortgages in the US -
Treasury Secretary Henry Paulson says the two firms’ debt levels posed a “systemic risk” to financial stability and that, without action, the situation would get worse.
At the same time, in the UK, the Nationwide announces it will merge with two smaller rivals, the Derbyshire and Cheshire Building Societies.
9 September
More bad news emerges for the UK economy as the ONS reveals manufacturing output fell by 0.2% between June and July, raising a real fear of recession.
Meanwhile, the British Retail Consortium reports UK retail sales values fell by 1.0% on a like-for-like basis from August 2007.
On the housing front, there were more negative headlines with the Royal Institute of Chartered Surveyors
while the CML reported that the number of first-time buyers has hit its lowest level since its survey began in January 2002.
10 September
Wall Street bank Lehman Brothers posts a loss of $3.9bn for the three months to August.
The announcement comes against a background of further dire economic warnings from the European Commission, which
15 September
After days of searching frantically for a buyer,
becoming the first major bank to collapse since the start of the credit crisis.
Former Federal Reserve chief Alan Greenspan dubs failure as “probably a once in a century type of event” and warns that other major firms will also go bust.
Meanwhile fellow US bank
for $50bn, the latest twist in a dramatic turn of events on Wall Street.
16 September
The US Federal Reserve
to save it from bankruptcy. AIG gets the loan in return for an 80% public stake in the firm.
17 September
Britain’s biggest mortgage lender
creating a banking giant holding close to one-third of the UK’s savings and mortgage market. The deal follows a run on HBOS shares.
25 September
In the largest bank failure yet in the United States, Washington Mutual, the giant mortgage lender which had assets valued at $307bn is
Analysts say much of its problems have been caused by the group’s 2006 purchase of mortgage lender Golden West for $25bn at the height of the then US housing boom.
28 September
The credit crunch hits Europe’s banking sector as the European banking and
It is seen as too big a European bank to be allowed to go under.
Authorities in the Netherlands, Belgium and Luxembourg agree to pour in 11.2bn euros ($16.1bn; £8.9bn). Fortis’ share price has fallen sharply amid concerns about its debts.
In the US lawmakers announce they have reached a bipartisan agreement on a rescue plan for the American financial system.
The package, to be approved by Congress, allows the Treasury to spend up to $700bn buying bad debts from ailing banks.
It will be the biggest intervention in the markets since the Great Depression of the 1930s.
29 September
In Britain the
The British government takes control of the bank’s £50bn mortgages and loans, while its savings operations and branches are sold to Spain’s Santander.
The Icelandic government takes control of the country’s third-largest bank Glitnir after the company had faced short-term funding problems.
Wachovia, the fourth-largest US bank, is bought by its larger rival Citigroup in a rescue deal backed by the US authorities. Under the deal, Citigroup will absorb up to $42bn of Wachovia losses.
The US House of Representatives rejects a $700bn rescue plan for the US financial system – sending shockwaves around the world.
It opens up new uncertainties about how banks will deal with their exposure to toxic loans and how credit markets can begin to operate more normally. Wall Street shares plunge, with the Dow Jones index slumping 7% or 770 points, a record one-day point fall.
30 September
as the deepening credit crisis continues to shake the banking sector.
After all-night talks the Belgian, French and Luxembourg governments said they would put in 6.4bn euros ($9bn; £5bn) to keep it afloat.
Separately,
.
In the UK, Prime Minister Gordon Brown says the government is planning to raise the limit on guaranteed bank deposits from £35,000 to £50,000.
1 October
which eventually approves an amended $700bn financial rescue bill.
Market confidence that Lloyds TSB’s takeover of HBOS will not be derailed by stock market volatility sees HBOS shares rise 20%.
A report says that French Finance Finister Christine Lagarde calls for an emergency EU bail-out fund for banks threatened with failure.
The EU says it is looking at whether Ireland’s full guarantee of saving deposits is anti-competitive.
3 October
The US House of Representatives
The 263-171 vote was the second in a week, following its shock rejection of an earlier version on Monday.
The UK’s City watchdog, the Financial Services Authority (FSA)
6 October
Germany announces a
The deal to save Hypo Real Estate, reached with private banks, is worth 15bn euros more than the first rescue attempt, which fell apart a day earlier.
World stock markets
.
The
Chancellor Angela Merkel’s had earlier said that no German savers would lose any money. But it emerges that this was a was a political pledge, rather than one which would see it change laws on banking deposits.
However Denmark had already responded by giving a 100% guarantee on savings, while Sweden increased its protection levels.
The country’s largest banks agree to sell off some of their foreign assets and bring them home.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7521250.stm
Published: 2008/10/06 10:52:53 GMT
© BBC MMVIII
October 7, 2008
Timeline: Global credit crunch
A year ago, few people had heard of the term credit crunch, but the phrase has now entered dictionaries.
Defined as “a severe shortage of money or credit”, the start of the phenomenon has been pinpointed as 9 August 2007 when bad news from French bank BNP Paribas triggered sharp rise in the cost of credit, and made the financial world realise how serious the situation was.
The problems, however, started much earlier. GROWING SUB-PRIME PROBLEMS
After a two year period between 2004 and 2006 when US interest rates rose from 1% to 5.35%, the US housing market begins to suffer, with prices falling and a rise in homeowners defaulting on their mortgages.
Default rates on sub-prime loans – high risk loans to clients with poor or no credit histories – rise to record levels.
APRIL-AUGUST 2007: SUB-PRIME CONTAGION
April
|
The credit losses associated with sub-prime have come to light and they are fairly significant…Some estimates are in the order of between $50bn and $100bn of losses |
New Century Financial, which specialises in sub-prime mortgages,
As it sold on many of its debts to other banks, the collapse in the sub-prime market begins to have an impact at banks around the world.
July
Investment bank Bear Stearns tells investors they will get little, if any, of the money invested in two of its hedge funds after rival banks refuse to help it bail them out.
Federal Reserve chairman Ben Bernanke follows the news with
AUGUST 2007: SCALE OF THE CREDIT CRISIS EMERGES
9 August 2007
|
BNP’s statement is scary, to put it mildly |
Investment bank BNP Paribas tells investors they will not be able to take money out of two of its funds because it cannot value the assets in them, owing to a “complete evaporation of liquidity” in the market.
It is the clearest sign yet that banks are refusing to do business with each other.
The European Central Bank
. It adds a further 108.7bn euros over the next few days.
The US Federal Reserve, the Bank of Canada and the Bank of Japan also begin to intervene.
17 August
by half of a percentage point to 5.75%, warning the credit crunch could be a risk to economic growth.
21 August
UK sub-prime lenders begin to withdraw mortgages or put up the cost of borrowing for UK homeowners with poor credit histories.
28 August
German regional bank Sachsen Landesbank faces collapse after investing in the sub-prime market;
SEPTEMBER 2007: A RUN ON A BANK
3 September
German corporate lender IKB
4 September
The rate at which banks lend to each other rises to its highest level since December 1998.
The so-called
banks either worry whether other banks will survive, or urgently need the money themselves.
13 September
|
The fact that it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives |
The BBC reveals Northern Rock has asked for and
in the latter’s role as lender of last resort.
Northern Rock relied heavily on the markets, rather than savers’ deposits, to fund its mortgage lending. The onset of the credit crunch has dried up its funding.
A day later depositors withdraw £1bn in what is
They continue to take out their money until the government steps in to guarantee their savings.
18 September
The US Federal Reserve
19 September
After previously refusing to inject any funding into the markets,
OCTOBER 2007: MAJOR LOSSES BEGIN TO EMERGE
1 October
Swiss bank UBS is the world’s first top-flight bank to
The chairman and chief executive of the bank step down. Later, banking giant Citigroup unveils a sub-prime related loss of $3.1bn. A fortnight on Citigroup is forced to write down a further $5.9bn. Within six months, its stated losses amount to $40bn.
30 October
Merrill Lynch’s chief
NOVEMBER 2007: UK HOUSING MARKET ‘TURNS DOWN’
29 November
The Bank of England
30 November
The Council for Mortgage Lenders (CML)
saying that without more funding available on financial markets, mortgage lenders will not be able to offer as many mortgages.
DECEMBER 2007: HELP IS AT HAND
6 December
US President George W Bush
The Bank of England cuts interest rates by a quarter of one percentage point to 5.5%.
13 December
The US Federal Reserve
The Bank of England calls it an attempt to “forestall any prospective sharp tightening of credit conditions”. The move succeeds in temporarily lowering the rate at which banks lend to each other.
17 December
The central banks continue to make more funding available.
and, the following day, $500bn from the European Central Bank to help commercial banks over the Christmas period.
NEXT UP: THE BOND INSURERS
19 December
Ratings agency Standard and Poor’s downgrades its investment rating of a number of so-called monoline insurers, which specialise in insuring bonds. They guarantee to repay the loans if the issuer goes bust.
There is concern that insurers will not be able to pay out, forcing banks to announce another big round of losses.
9 January 2008
The World Bank
as the credit crunch hits the richest nations.
18 January
A rush to withdraw money from its commercial property funds
for investors wanting to take their money out.
It blames the rush of withdrawals on concerns about the US sub-prime mortgage collapse, recession worries and interest rates.
21 January
Global stock markets, including London’s FTSE 100 index,
22 January
The US Fed
- its biggest cut in 25 years – to try and prevent the economy from slumping into recession.
It is the first emergency cut in rates since 2001. Stock markets around the world recover the previous day’s heavy losses.
31 January
A major bond insurer MBIA,
-blaming its exposure to the US sub-prime mortgage crisis.
FEBRUARY – MARCH 2008: BIG NAME CASUALTIES
7 February
US Federal Reserve boss
saying he is closely monitoring developments “given the adverse effects that problems of financial guarantors can have on financial markets and the economy”.
The Bank of England cuts interest rates by a quarter of one percent to 5.25%.
8 February
|
Some investors forgot the golden rule of financing: ‘Don’t buy things that you don’t understand’ |
In the UK, the latest
its highest level since 1999.
10 February
Leaders from the G7 group of industrialised nations say worldwide losses stemming from the collapse of the US sub-prime mortgage market could reach $400bn.
17 February
After considering a number of private sector rescue proposals, including from Richard Branson’s Virgin Group,
7 March
In its biggest intervention yet,
to try to improve liquidity in the markets.
17 March
Wall Street’s fifth-largest bank,
in a deal backed by $30bn of central bank loans.
A year earlier, Bear Stearns had been worth £18bn.
28 March
Nationwide
revising its previous forecast of no change in prices.
APRIL 2008: THE 100% MORTGAGE IS CONSIGNED TO HISTORY
2 April
Moneyfacts, which monitors financial products,
in the previous seven days.
|
I have a deep sense of shock at how deeply our successful industry has already been hit by these unprecedented funding market conditions |
Five days later the 100% mortgage disappears when
8 April
The International Monetary Fund (IMF), which oversees the global economy,
It says the effects are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.
10 April
The Bank of England cuts interest rates by a quarter of one percent to 5%.
11 April
A warning is issued by the CML that the amount of funding available for mortgages in the UK could be cut in half this year.
|
The effects of the credit crunch are likely to be broader, deeper and more protracted than previously expected |
15 April
Confidence in the UK housing market
according to the Royal Institution of Chartered Surveyors, because of the “unique liquidity blight”.
But it does add that the situation is good news for buyers with large deposits who can buy property that was previously out of reach.
21 April
The Bank of England announces details of an
by allowing them to swap potentially risky mortgage debts for secure government bonds.
APRIL – JUNE 2008: BANKS PASS ROUND THE HAT
22 April
Royal Bank of Scotland
with a £12bn rights issue – the biggest in UK corporate history.
The firm also announces a write-down of £5.9bn on the value of its investments between April and June – the largest write-off yet for a British bank.
25 April
Persimmon becomes
citing the lack of affordable mortgages and a fall in consumer confidence.
It adds sales have fallen by a quarter since the beginning of the year.
|
Because of the uncertainties in the global economy and the UK lending environment, it is difficult to predict when the [housing] market will improve |
29 April
The CML says
, the lowest monthly number since records began in 1999.
30 April
The first
is recorded by Nationwide.
Prices were 1% lower in April compared to a year earlier after a “steep decline” in home buying over the previous six months.
Later in the week, figures from the UK’s biggest lender Halifax, show a 0.9% annual fall for April.
2 May
More than
government figures show, a rise of 54% on the previous year. Retail and construction firms are hardest hit.
22 May
Swiss bank UBS, one of the worst affected by the credit crunch,
to cover some of the $37bn it lost on assets linked to US mortgage debt.
19 June
There are significant developments in two major credit crunch-related investigations in the US, which it is hoped will restore confidence in the credit markets.
The FBI
as part of a crackdown on alleged mortgage frauds worth $1bn.
Separately,
linked to sub-prime mortgages.
It is alleged they knew of the funds’ problems but did not disclose them to investors, who lost a total of $1.4bn.
25 June
Barclays
to bolster its balance sheet.
The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in the British bank, giving it a 7.7% share in the business. A number of other foreign investors increase their existing holdings.
JULY 2008: MAJOR LENDERS ON THE EDGE
8 July
The gloomy findings of a survey of its members
within months.
Meanwhile, the FTSE 100 stock index briefly dips into a “bear market”, in which the market suffers a 20% fall from its recent highs.
|
The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected |
13 July
- the second-biggest bank in US history to fail.
14 July
Financial authorities
As owners or guarantors of $5 trillion worth of home loans, they are crucial to the US housing market and authorities agree they could not be allowed to fail.
The previous week, there had been a panic amongst investors that they might collapse, causing their share prices to plummet.
21 July
Just
because they are priced higher than existing shares are trading on the stock market.
But HBOS still gets the £4bn it wanted, as the unsold new shares are bought by the issue’s underwriters.
31 July
UK house prices
a decline of 8.1%.
The average home now costs £169,316. That is nearly £15,000 cheaper than in the same month last year.
Meanwhile, HBOS reveals that profits for the first half of the year sank 72% to £848m, while bad debts rose 36% to £1.31bn as customers failed to repay loans.
AUGUST – SEPTEMBER 2008: GIANTS SUFFER
4 August
Global banking giant HSBC
after suffering a 28% fall in half-year profits.
Of Europe’s top banks, HSBC has among the heaviest exposure to the troubled US housing and credit markets.
22 August
The bad news continues with revised figures from the ONS revealing that the UK economy is a standstill.
28 August
Nationwide reveals that UK house prices have fallen by 10.5% in a year.
A day later
blaming surging mortgage arrears for a rise in impairment.
Looking ahead, it warned it expected arrears to remain at high levels for the rest of the year.
30 August
Chancellor Alistair Darling
in an interview with the Guardian newspaper, saying the current downturn would be more “profound and long-lasting” than most had feared.
1 September
Official figures from the Bank of England show a slump in approved mortgages for July.
Meanwhile, while
and two-year lows of $1.80.
2 September
In an effort to kick-start the UK housing market
from £125,000 to £175,000.
But there is more bad news, as the Organisation for Economic Cooperation and Development forecasts that the UK will be in a full blown recession by the end of the next two quarters. A day later the European central bank cuts growth forecast 2009 to 1.2% from 1.5%.
4 September
The Bank of England leaves rates on hold at 5% while the latest figures from the Halifax show that house prices in England and Wales continue to fall.
5 September
A raft of negative news from around the world
The US labour market figures – which showed the unemployment rate rising to 6.1% – were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.
6 September
The Halifax
Chief executive Andy Hornby explains that British banks will continue to suffer major problems in offering loans until they can raise significant sums on wholesale markets, something that will not be possible until US house prices recover.
7 September
Mortgage lenders Fannie Mae and Freddie Mac – which account for nearly half of the outstanding mortgages in the US -
Treasury Secretary Henry Paulson says the two firms’ debt levels posed a “systemic risk” to financial stability and that, without action, the situation would get worse.
At the same time, in the UK, the Nationwide announces it will merge with two smaller rivals, the Derbyshire and Cheshire Building Societies.
9 September
More bad news emerges for the UK economy as the ONS reveals manufacturing output fell by 0.2% between June and July, raising a real fear of recession.
Meanwhile, the British Retail Consortium reports UK retail sales values fell by 1.0% on a like-for-like basis from August 2007.
On the housing front, there were more negative headlines with the Royal Institute of Chartered Surveyors
while the CML reported that the number of first-time buyers has hit its lowest level since its survey began in January 2002.
10 September
Wall Street bank Lehman Brothers posts a loss of $3.9bn for the three months to August.
The announcement comes against a background of further dire economic warnings from the European Commission, which
15 September
After days of searching frantically for a buyer,
becoming the first major bank to collapse since the start of the credit crisis.
Former Federal Reserve chief Alan Greenspan dubs failure as “probably a once in a century type of event” and warns that other major firms will also go bust.
Meanwhile fellow US bank
for $50bn, the latest twist in a dramatic turn of events on Wall Street.
16 September
The US Federal Reserve
to save it from bankruptcy. AIG gets the loan in return for an 80% public stake in the firm.
17 September
Britain’s biggest mortgage lender
creating a banking giant holding close to one-third of the UK’s savings and mortgage market. The deal follows a run on HBOS shares.
25 September
In the largest bank failure yet in the United States, Washington Mutual, the giant mortgage lender which had assets valued at $307bn is
Analysts say much of its problems have been caused by the group’s 2006 purchase of mortgage lender Golden West for $25bn at the height of the then US housing boom.
28 September
The credit crunch hits Europe’s banking sector as the European banking and
It is seen as too big a European bank to be allowed to go under.
Authorities in the Netherlands, Belgium and Luxembourg agree to pour in 11.2bn euros ($16.1bn; £8.9bn). Fortis’ share price has fallen sharply amid concerns about its debts.
In the US lawmakers announce they have reached a bipartisan agreement on a rescue plan for the American financial system.
The package, to be approved by Congress, allows the Treasury to spend up to $700bn buying bad debts from ailing banks.
It will be the biggest intervention in the markets since the Great Depression of the 1930s.
29 September
In Britain the
The British government takes control of the bank’s £50bn mortgages and loans, while its savings operations and branches are sold to Spain’s Santander.
The Icelandic government takes control of the country’s third-largest bank Glitnir after the company had faced short-term funding problems.
Wachovia, the fourth-largest US bank, is bought by its larger rival Citigroup in a rescue deal backed by the US authorities. Under the deal, Citigroup will absorb up to $42bn of Wachovia losses.
The US House of Representatives rejects a $700bn rescue plan for the US financial system – sending shockwaves around the world.
It opens up new uncertainties about how banks will deal with their exposure to toxic loans and how credit markets can begin to operate more normally. Wall Street shares plunge, with the Dow Jones index slumping 7% or 770 points, a record one-day point fall.
30 September
as the deepening credit crisis continues to shake the banking sector.
After all-night talks the Belgian, French and Luxembourg governments said they would put in 6.4bn euros ($9bn; £5bn) to keep it afloat.
Separately,
.
In the UK, Prime Minister Gordon Brown says the government is planning to raise the limit on guaranteed bank deposits from £35,000 to £50,000.
1 October
which eventually approves an amended $700bn financial rescue bill.
Market confidence that Lloyds TSB’s takeover of HBOS will not be derailed by stock market volatility sees HBOS shares rise 20%.
A report says that French Finance Finister Christine Lagarde calls for an emergency EU bail-out fund for banks threatened with failure.
The EU says it is looking at whether Ireland’s full guarantee of saving deposits is anti-competitive.
3 October
The US House of Representatives
The 263-171 vote was the second in a week, following its shock rejection of an earlier version on Monday.
The UK’s City watchdog, the Financial Services Authority (FSA)
6 October
Germany announces a
The deal to save Hypo Real Estate, reached with private banks, is worth 15bn euros more than the first rescue attempt, which fell apart a day earlier.
World stock markets
.
The
Chancellor Angela Merkel’s had earlier said that no German savers would lose any money. But it emerges that this was a was a political pledge, rather than one which would see it change laws on banking deposits.
However Denmark had already responded by giving a 100% guarantee on savings, while Sweden increased its protection levels.
The country’s largest banks agree to sell off some of their foreign assets and bring them home.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7521250.stm
Published: 2008/10/06 10:52:53 GMT
© BBC MMVIII
Ignore the Doomsday Headlines
October 2, 2008Continue to flex your networking muscles.
By Dr. Ivan Misner, BNI Founder and Chairman
Today’s news is full of economic soap operas. In the United States, Congress, the White House, and the pundits are debating the so-called bailout of yet another pillar of Corporate America. European nations and others around the globe are struggling with recessionary pressures. Voices everywhere seem to be spouting economic doom and gloom.
Now, please, lean in close and listen carefully. I’m going to ask you to do something difficult, yet very important: Ignore all those doom and gloom voices.
It’s not that I want to deny reality. Nor am I judging whether all those important voices are right or wrong.
What I am saying is, all those voices are sending you useless information. Not only are they urging you to be afraid … very afraid … they are completely ignoring the solutions on which you need to focus. There’s nothing like good old fashioned fear to freeze an entrepreneur in his or her tracks!
When Franklin Delano Roosevelt wisely said during America’s Depression that the only thing we have to fear is fear itself, he left something out. When you are in business, at any time in any nation, the other thing you have to fear is inaction. Not very poetic, I know, but it’s true.
Let others worry about the macro economic picture. You have a micro economy in which you are a vital and central player. Does the government or an economist know the ins and outs of your business better than you? Have you received any calls lately offering to bail you out with taxpayer money if your business slides to the brink of ruin? I’m guessing the answer is “no” to both questions!
You already know this in your gut: No bailout is coming your way … unless you do it yourself. No rescue plan is being prepared for your business … unless you prepare it yourself. And no solutions to your problems will be developed … unless you develop it yourself.
The more you focus on fear, the more afraid you will become. The more you focus on obstacles, the larger they will loom. And the more you focus on today’s global economic doom and gloom headlines, the less time, energy, and faith you’ll have to focus on building the prosperous, successful, well-networked business you really want.
A close friend of mine recently got hit by a car and spent weeks in hospitals and rehab centers. He says he learned a few things about fear during this time. When he tells himself, while perched on one leg to perform some ordinary task, “Wait … I might fall over,” sure enough, he falters.
But when he tells himself, “I have perfect balance,” something funny happens: He remains steadily upright longer than he thought possible.
Your business is not much different. If you tell yourself, “I can’t succeed in this economic downturn,” you probably won’t. But if you focus on specific solutions to the particular issues and challenges and opportunities of your business—your niche market, your current and prospective customers—you are likely to enjoy more success than all the naysayers put together would have predicted.
What the bigwigs of Wall Street, Pennsylvania Avenue, the London Financial District and the European Central Bank don’t seem to understand is this: Out here in the real world of entrepreneurial small business, “Givers Gain.”
Want to help the economy? Just turn to your BNI network, find someone who needs help, then give them all the referrals you can.
By sticking together and helping one another, we can face down the doom and gloom; we can build our businesses despite the headlines; and, we can show others around the world the economic power of persistent, skillful, and generous networking.
Here is a thought
October 2, 2008Comment by Keith Ferrazzi on August 23, 2008 at 5:05pm
Here is a thought. If you all ever decide to meet up. Remember that your immediate reaction may not be to like each other. We all have instant pre-judgements (prejudices) of other people. its natural but you have to see beyond the differences- some of you drink. Others may not. Some of you may be very shy and used NEA as a baby step, others of you perhaps could have written the book! The idea would be to imagine that you will really connect and imagine people who you have met before who you end up connecting with even though you may not have thought it possible. PROJECT the positive before you enter the room. Also before you meet try to get ready to dig in and be AUTHENTIC. Put on no airs – just be yourselves – your generous caring selves! Drop the acts. drop any of those things we do that push people away. I promise, if you all talk about what you are really passionate about – and then tell stories about those passions that bring to life why this is a passion point… then you share your dreams… on all aspects of your lives. talk about what your priorities are, really. where do you dream of being… and talk about what holds you back and do so openly and LISTEN with Generosity knowing how thought this is for some! And finally, be sure to talk about your struggles as well but with an eye toward putting them behind you, not letting them hold you back. just a few starter ideas about getting together. We can always find things in others that we connect with. Make that a PROACTIVE CHOICE when you meet. it really is a CHOICE!!
10 mistakes that made flipping a flop
September 21, 2008|
Posted 10/22/2006 9:32 PM ET By Noelle Knox, USA TODAY SACRAMENTO — If there’s a poster child for everything that went wrong in the real estate boom, it just might be Casey Serin. In one year, the 24-year-old website-designer-turned-real estate-flipper bought eight homes in four states — and in every case but one, he put no money down. At his peak, in April, Serin had $93,000 he’d taken out of the homes as he bought them. By July, he was broke, desperate for one last deal. Now? Serin has $140,000 in credit card and credit-line debt and five houses in foreclosure. Last month, he started iamfacingforeclosure.com, a blog that’s drawn both notes of condolence and expletive-laced condemnation. “I did some stuff shady, but I’m not going to hide from it,” he says. “Somebody can learn from it. I’ve already had people contact me and say, ‘Hey, I’m in the same place.’ “ The rise and fall of Casey Serin is a tale with moral and financial lessons for real estate buyers, lenders and regulators. Having consumed real estate guides and seminars, Serin made just about every mistake a newbie could make — most of them, he admits, were no one’s fault but his own — from fudging loan applications to buying homes sight-unseen. That he began with bold dreams of class mobility makes his fall a peculiarly American saga. Serin didn’t know much about real estate at 19, when he bought his first condo. As a website designer, Serin was earning $35,000 a year at S.M.A.R.T. Association, a maker of marketing systems for health care providers. He quit to start his own Web-design company but couldn’t earn enough to cover his mortgage. So he moved in with his parents and sold the condo a few months later. His profit: $30,000. “My goal was to reinvest that money,” Serin says. “But I also needed a car. My car was falling apart. I used some of it to keep me going, and for living expenses and things. And I used some of it to go on dates.” He also stopped working for three months. By the time he married in 2004, the money was gone. He and his wife used credit cards to cover living costs because Serin’s business wasn’t bringing in enough money. When he found a job that summer as a Web designer, the couple had piled up nearly $20,000 in card debt, half of which they’d spent on real estate courses. He bought Carleton Sheets’ No Down Payment real estate program and attended seminars by Russ Whitney, author of The Millionaire Real Estate Mindset, and others. “Sure, they used pressure sales tactics to get you into it, but looking back on it, I don’t regret it,” he says. “They told me how to start safe, but I really didn’t start safe. I went all out. So it was my own fault.” As with all investors, Serin’s goal was to build wealth. He was intrigued by Robert Kiyosaki’s Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money — That the Poor and Middle Class Do Not! “My eyes were opening up: ‘Oh, OK, this is how the world works.’ “ Mistake No. 1 Using ‘liar loans’ In October 2005, Serin was desperate to pay off credit cards. But he was eager, too, to put his real estate training to use. He sought “a motivated seller — someone who wants to sell quick and doesn’t mind giving a discount to get the deal done.” He found a Sacramento couple who’d twice cut the price on their home and were asking $360,000. Aware that the market was softening, Serin successfully bid $330,000, including his closing costs. But he also wanted to pay off his credit cards. So he took out a $360,000 mortgage and asked the sellers to give him $30,000 in cash once the deal closed. “I was able to qualify for the loan at 100% financing,” Serin says. “I used a ‘stated-income loan.’ It was really higher than I was making, so it was a ‘liar loan’ — that’s what they call them in the industry.” Stated-income loans were created to help people with variable incomes, like commission-sales jobs, qualify for mortgages. Lenders require little or no proof of income, but they charge a higher interest rate to compensate for the risk. Stated-income loans have grown in pricey areas where traditional buyers are stretching past debt-to-income lending ratios, and some lenders turn a blind eye. In California, 75% of purchase loans this year have little or no documentation of income, up from 34% in 2000, First American LoanPerformancesays. But Serin also deceived the bank by saying he’d live in the home. Banks typically charge higher rates and require larger down payments for investment properties. “Lying on a mortgage application is a federal crime,” says Joseph Falk of the National Association of Mortgage Brokers. “It includes bank fraud, wire fraud and mail fraud and potentially a host of state offenses. This can result in jail time.” At the time, though, Falk says some lenders were willing to ease their criteria for borrowers because, with housing prices surging, they knew they likely wouldn’t lose money even if the loan went bad. Mistake No. 2 Overpaying Serin flipped the Sacramento house immediately, and agreed to purchase the buyer’s old house. But Serin’s buyer needed to put 20% down and had to pay a penalty to the bank for paying off his mortgage early. So Serin helped him out at his own expense. “I paid too much for his house,” he concedes. And since he’d already used cash from the first house to pay off credit cards, Serin took out a $10,000 credit line for repairs on the buyer’s old house. Mistake No. 3 Lacking cash Serin put the second house on the market but lacked the money for the $2,500 monthly mortgage, plus his rent and payments on the credit line. So he rented the house with an option to buy it later. Acting in haste, he rented to tenants who could pay just $1,400 a month. “I got desperate,” he says. “I couldn’t flip it, and I had to stop the bleeding.” Mistake No. 4 Quitting your day job “Now, I’m thinking I’ve got negative cash flow, I’ve got the credit line. I need to do more deals.” As the California real estate market hit the skids in late 2005, investors began looking in such states as New Mexico, Texas and Utah, where prices were still climbing. Serin, with dreams of becoming a full-time investor, decided to take three weeks off work in January and go to New Mexico. “My goal was this: to find enough deals in three weeks that I could put under (a sales) contract … so I could have enough in the pipeline so that it’s safe for me to quit my job. If I can’t get anything out there, then I go back to my job. But in my mind, I was already succeeding, and I wasn’t looking back.” He bought two homes in New Mexico with no money down and liar loans. He took back $20,000 in cash — enough to carry his payments for a while. Back in Sacramento, he gave two weeks’ notice. Mistake No. 5 Hiring an unlicensed contractor Serin next bought a house in Modesto, Calif., that he’d found through the Internet. The deal was packaged by a “wholesaler.” A wholesaler finds an under-priced home, puts it under contract and then transfers it to an investor in exchange for a fee of $5,000 to $15,000. The house was appraised at $380,000; Serin paid $323,000, including closing costs and $15,000 he got back from the seller. The wholesaler “told me the repairs that needed to be done, but it was a lot more than he described.” Serin hired a contractor, but when he sought the license number, he couldn’t find any records. The contractor said the work would take a month or two. After three months, the job was only half done and the contractor wanted more money. Mistake No. 6 Buying sight-unseen The sixth home Serin bought was in Utah. A developer had subdivided a tract and sold off the lots for custom homes. The last lot had a 25-year-old house on it. “I bought it sight-unseen,” Serin recalls. The developer “told me, ‘It’s outdated; you just have to update everything.’ I didn’t realize, not only is it outdated; it’s awkward looking. … Every room had a different color carpet. Some rooms had a photo-type wallpaper with nature scenes.” He realized that the $18,000 in cash he pulled out of the deal wouldn’t begin to cover the renovation needed. He put the house back on the market and left town. Mistake No. 7 Buying out of state On the trip to see the Utah property, Serin stopped in New Mexico. One of the homes he’d bought there was rented; the other was on the market but not selling. Fearing he’d soon have to start paying the mortgage, Serin tried to rent it out with an option to buy. “I was even saying, ‘You don’t need to put anything down, just show me you have a good job, good credit and take over,” he says. “But I couldn’t do it fast enough. I was only there a week and a half.” Mistake No. 8 Buying too many properties too fast The seventh house was near Sacramento. “I basically used up all of the equity… and the market is already going down,” Serin says. “But it made sense to me at the time because I’ll take the $50,000 (cash back from the seller). I’m finding it takes a lot more money than I thought, and what if I run out of the money I already took out?” The mounting financial pressure was getting to the young flipper. “I’m thinking about how to use the cash (backs) wisely and keep everything afloat,” Serin says. “I realize I’m buying way too much. I’m not able to manage it all. And it just sort of happened. By April, I had six houses.” But he didn’t stop buying. He was caught up in the frenzy. Mistake No. 9 Underestimating remodeling costs In May, he snatched up a house in Dallas. “I thought it was going to be my best deal so far, because of the spread,” he says. The wholesaler said the property was appraised at $310,000, and the owners would sell it for $190,000, but it had to close quickly. Unable to get another loan so fast, Serin went to a private lender, who appraised the property at $275,000. To get the loan, Serin had to put down $30,000 and put $30,000 more into escrow to cover the needed repairs. Sight unseen, Serin went for it. When he finally saw it, he said, “The layout was weird. There was a garage conversion, which I knew about, but because of my inexperience I didn’t know the garage conversion kills it because very few people want an extra room. Most people want the garage.” Serin thought he could renovate the property for $15,000. “I ended up spending $30,000,” he said. “It ended up being a monster.” His bank balance was dwindling. Serin was also burning cash traveling between his properties. He purses his lips and inhales sharply. “That’s the sound I was hearing.” Mistake No. 10 Having a poor exit strategy Having just read How to Sell Your Home in 5 Days by Bill Effros, Serin flew to New Mexico in June and auctioned the vacant house in one week, eking out a tiny profit. He tried it a week later in Texas. A disaster. Just three low bids. By July, Serin was out of cash and living off credit cards. He took out more lines of credit to try to keep pace with his mortgages. He wanted to go for one last deal in New Mexico. His wife saw copies of the letters he’d written to the banks. “She’s like, ‘I don’t want no fishy business.’ “Part of me is like, ‘Well, I know it’s not right. I know I’m lying to the banks, but I’ve got to do what I’ve got to do. I got into this mess. I’ve got to get out somehow.’ And it was like, once you make one lie, you’ve got to keep lying, in a way.” His last loan was rejected, and Serin hit bottom. The bills for his mortgages and other debts total $20,000 a month. He’s says he’s determined to pay off his loans. He’s considering bankruptcy, restructuring the loans and trying to get another Web-design job. Serin’s current situation is bleak. He is currently unemployed as is his wife, who has gone back to college to get an accounting degree. They rent an apartment and have $140,000 in debt, and the remaining five houses he owns are facing foreclosure. Yet, ever the optimist, he says, “There might be some other possibilities in the works right now for some additional real estate deals that would be completely aboveboard and allow me to make some money. “There are some wholesaling opportunities where you find a contract and sell it to another investor. You can make 5, 10 or 15 grand on that stuff. That’s enough to almost carry it for a month.” |
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